When you first decided on a career, how much money were you expecting to make after you graduated? Chances are good there is a sizeable gap between what you estimated and what you are actually making now that you are out in the workforce. You find yourself working longer hours than you ever expected, and yet you are pulling in barely enough to get by. Even if you actually managed to find a job in your field (not always possible these days), you may still find yourself struggling to make ends meet.
Experiences like these can really destabilize your sense of accomplishment and self-worth. It doesn’t help that you always seem to be surrounded by people who are zooming by you on their financial trajectories. You look at your bank account balance and your assets (or lack of assets) and wonder whether you are the only one who is lagging behind in achieving your financial goals.
The reality is that a lot of workers are having a hard time. A lot of people think that wages have increased significantly over time (we all know that older person who says, “I was working for just $2.50 an hour when I was your age—you have it good!”). But in reality, when you adjust for inflation, real wages have hardly changed since the 1960s. And actually, wages have dropped since the recession.
So where does that put you? Probably in a more average position than you realize. You may think you are way behind the game, but you may actually be quite competitive among your peers.
The average net worth by age is actually fairly modest, especially among Millennials. Follow the link and you will find a chart which shows the average net worth in dollars for different age brackets: <35, 35-44, 45-54, 55-64, and 65+. To read this chart, you need to understand what “percentiles” mean. Basically, if you are in a certain age group and your income falls within one of the bars, that establishes your percentile. If you see you are in the 50th percentile, that means that you are earning more than roughly 50% of your same-aged peers.
So let’s say you are in the
So if you are saving money at all at a young age, count yourself as one of the more successful members of your generation. That is, relatively speaking, good news. And now you know that all of your peers are not just blazing past you—the few that are blazing by just happen to be really vocal about it. And that is not surprising; people with money get noticed. Do not be surprised if you also hear a lot of exaggeration. Some of it could also be your imagination. It is easy to get down on yourself.
Unfortunately there is a problem here still. If things continue the way they are, you are going to have a very hard time saving for retirement. In fact, it is doubtful that most Millennials will be able to retire comfortably at all.
So what can you do to reach retirement age with an actual nest egg? Well, there are some factors which are out of your control. The economy is what it is. But you can take the following steps:
• Cut back on unnecessary expenses. Live as modestly as you can. Move into a smaller apartment. Switch from central heating to a space heater. Learn to cook your own food. If you grew up in the middle class and you now earn middle income, you need to realize there is going to be a gap between your experiences growing up and the lifestyle you live now. It is not going to match your parents’ means—even if you are earning the same “amount” they did at your age. Inflation has changed what $40,000 a year really means.
• Get your student loans paid back as quickly as you can. That way you will not lose more money through the interest.
• Try using a robo-advisor to invest. The entry barriers are low, and the sooner you get started, the more time you will have to compound your wealth before you reach retirement age.
It can be scary knowing that you may never retire despite your hard work, your expertise in your field, and your college degree. But there is still a lot you can do to push yourself further along on the trajectory toward success.